Sunday, July 16, 2017

Ohmigod, he really did this. At the Institute for Advanced Study in Tel Aviv, during a major conference honoring his profoundly wise and honorable uncle, the late Kenneth Arrow, Larry did this. The vast majority of his talk is an outstanding discussion of Ken Arrow as an economist and a person, full of interesting details, all leading to the conclusion that his uncle was both one of the most brilliant economists who ever lived as well as a deeply wise, personable, morally incorruptible, and all but impeccable as well as just a plain nice guy.

I did not know Ken nearly as well as him, of course, but all that I ever saw of him, as well as everything I have heard of him personally through my sources, completely supports this. To the extent he had noticeable faults they were those of an absent-minded professor who is also a genius. He paid no attention to obvious simple things. He was out of touch with various mundane realities, sometimes embarrassingly so. I shall add a detail not in Larry's account that I have from a primary source. In his old age he would sometimes wander the halls of the Stanford econ dept with his fly unzipped. Nobody ever suggested or remotely thought that there was any ill intent in that. It was like Joe Stiglitz before he became a big star, tying his shoelaces together, something a distracted and brilliant person far beyond anybody around him would do out of absent-mindedness, although Arrow was far beyond Stigitz intellectually and historically, not even close.

So let me deal with the odd matters where on such an august occasion Larry made such an ass of himself. One is a matter of debate, and he put it out there: he and Arrow disagreed with how the post-Soviet transition should be handled. He recognizes that Ken disagreed with his policy as Treasury Secretary under Bill Clinton in the mid-to-late 90s about how to deal with the former USSR. He approved AID funds for Andrei Shleifer and a few others to "assist" in the transition process there, which ended up with Harvard University paying out over $22 million to end a suit by the US Treasury Dept against Shleifer for his conduct there. Summers's attempt to cover for Shleifer, involving him lying in an open meeting to the senior members of the Harvard faculty was the bottom line on why Larry was fired from being Harvard's president. Unsurprisingly, his wise uncle Arrow knew better, but, of course, Larry did not remotely tell the story of what went down there, implying that Ken was somehow unwisely out of touch with US policy as determined by him. (Dave Warsh has written decisively on this matter.) Ooooooooooooooog.

Which brings us to this astounding and utterly despicable bit about Joan Robinson and his other uncle, the late Paul A. Samuelson. So the bottom line outcome of the Cambridge capital theory debates as they came to a head in 1966 in the QJE was that Samuelson's effort to paper over the critique about aggregate neoclassical production functions coming from Joan Robinson and Piero Sraffa was wrong. He admitted it in his "Summing Up"paper in the fall 1966 issue of the QJE when such figures as Garegnani and Pasinetti showed that the attempt to dismiss the general presence of capital theoretic anomalies, more precisely, the general presence of non-monotonicity in the steady-state relations between the rate of profit and level of long term per capita consumption implied that "the foundations of economic theory are based on quicksand."

The bottom line is that he admitted he was wrong in his claims about the "surrogate production function," and that Joan Robinson and Piero Sraffa were right. In many later publications he maintained this position. Indeed, when I first met him personally in the early 70s and confronted him with all the details of the Cambridge Controversies in the Theory of Capital, he admitted that Cambridge, UK was right. He completely disarmed me at that point, of course. Yes, Joan Robinson and Piero Sraffa were right. Capital is only meaningfully discussed as being heterogeneous, ironically a position that Hayek came to before he abandoned the topic. What could I say?

Oh, but now we have his nephew in the venue of honoring his other uncle, the deeply impeccable Kenneth Arrow, reporting this snide wisecrack from Paul Samuelson. I have no doubt that Paul Samuelson made the remark, frustrated undoubtedly as he was with this most serious intellectual defeat of his entire (and very long) career. The occasion was a party celebrating Arrow's receipt of the Nobel Prize in 1972 at a point in time that the only other US Nobel recipient was Paul Samuelson. They were discussing all kinds of mathematical issues long after all the guests were gone and their wives were bored, and here we have Samuelson making inappropriate and nasty remarks about the woman who intellectually humiliated him. But somehow Larry Summers decided in his remarks on Ken Arrow at this very serious and offical commemoration to ever so quietly slip this utterly unjustified jibe at Joan Robinson in. Really, this is shameful.